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Groupon Enters The Highly Competitive Mobile Payment Processing Market

Written by Ken Gaebler
Published: 9/28/2012

The nation's largest daily deal provider rolls out a credit card reader designed to target small merchants.

Mobile payment processing is becoming a hotbed of competition with major players like Square and eBay vying to dominate the market for enhanced payment services. Similar to other mobile payment systems, Groupon's new product, Groupon Payments, features a proprietary credit card reader that can be attached to an iPhone or iPod Touch.

Groupon Credit Card Processing Solution

The primary differentiator between Groupon Payments and other mobile payment processing systems is price: Groupon is promoting its product as the lowest payment processing system on the market and is offering a lowest rate guarantee to merchants. Merchants that don't use Groupon's daily deal service can also use the company's mobile payment processing system, but will pay a higher rate.

Merchants who understand best practices for business coupons are very familiar with Groupon's business model. Many are now wondering how closely Groupon Payments will track with Groupon's daily deals and other small business products.

"Our goal is to provide merchants with the most affordable and powerful tools to run and grow their businesses," said Mihir Shah, VP Mobile and Merchant Products at Groupon. "With groundbreaking pricing and service, Groupon Payments does just that."

The launch of Groupon Payments comes on the heels of a successful pilot program in the San Francisco area. The Groupon Payments app can also be used to scan and redeem Groupons and to monitor additional spend above the value of the Groupon.

"While the cost savings are obvious, we were really impressed by the level of support provided by Groupon and the speed in which we received our payments," said Nadia McClinton, owner of Body By X and a pilot program participant. "From day one we discovered we could rely on Groupon Payments to effectively, quickly and easily process transactions and deliver a better customer and employee experience. It truly saves us time, money and effort that we can invest in other aspects of our operations."

Groupon is currently advertising swipe rates of 1.8% plus $0.15 per transaction for MasterCard, Visa and Discover; 3% plus $0.15 for American Express. The other attractive feature of Groupon Payments is that merchants will receive credit card deposits overnight rather than having to wait several days for payment.

On the surface, Groupon Payments appears to offer genuine value for business owners interested in adding mobile payments to their POS system. However, the question that many critics and merchants are asking is whether or not Groupon will continue to honor the lower rates after the merchant's Groupon promotion expires. If not, it may difficult for Groupon to convince small merchants that its payment service is substantially better than Square and other providers.

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